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PRESENTATION OF FISCAL YEAR 2016-17 BUDGET UPDATE
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RECOMMENDATION
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Summary
Net annual activity for Fiscal Year (FY) 2016-17 (unaudited) reflects a decrease in the Measure W, Stockton Safe Neighborhood Gang and Drug Prevention Police/Fire Response Fund of $508,194, which is $267,257 better than the expected decrease of $775,451. Overall revenues exceeded projections by $56,564, and spending was $210,693 lower than estimated. Encumbered expenditures of $36,756 that were not realized in FY 2016-17 will be rolled forward to FY 2017-18, leaving a net annual decrease to the fund balance of $544,950.
Background
On August 3, 2004, the Stockton City Council approved Resolution 04-0595 that authorized a special transaction and use tax for public safety services be put before voters. The resolution documents included program guidelines for the initiative that stipulate an independent citizen oversight committee be established and “meet at least annually to review revenues and expenditures” to verify spending is in compliance with the ordinance.
Voters approved Measure W, Stockton Safe Neighborhood, Gang, and Drug Prevention Police/Fire Response initiative in November 2004, and the City implemented both the ordinance and the guidelines. Additionally, the City Council later adopted Council Policy 500-2, which directs City staff to submit quarterly financial reports to the Committee for its review. Attached for review by the Measure W Independent Citizen’s Oversight Committee is the FY 2016-17 Measure W Budget Update for the Year Ended June 30, 2017.
The City records tax revenue as received from the California Department of Tax and Fee Administration (formerly the Board of Equalization). The City retains a consultant to review the State information and identify any additional revenues that might be due to the City, and an auditor to review the spending in the Fund is consistent with the City Ordinance.
Present Situation
Revenue of $9.98 million exceeded the budget of $9.92 million, by $56,564, with tax revenue 1% or $77,678 higher and investment earnings $21,114 lower than anticipated. Annual investment earnings consist of $14,566 of interest income and $20,680 of unrealized loss on the value of investments for a total loss of $6,114. The City intends to hold bond investments until maturity, which would result in no realizable loss, but accounting principles require the City to record unrealized gains and losses on its financial statements. As interest rates rise, the effective yield on marketable debt securities decreases and a decline in fair market value for trading purposes usually follows. But the redemption of marketable debt securities upon maturity will not result in realized gains or losses.
Total annual expenditures of $10.5 million were 2% or $210,693 less than $10.7 million budgeted. The primary differences are lower employee-related costs of $106,574, $37,706 of equipment for firefighters not being received before the end of the fiscal year, and less fuel being assigned to the fund of $66,449.
Over ninety percent of Measure W expenses were designated and used for police and fire compensation and equipment, which afforded 25 full time sworn staff in both the Police and Fire Departments. The City did not charge any administrative staff costs to the fund in FY 2016-17. The attached Measure W Budget Update (unaudited) report is for the year ended June 30, 2017, and complies with Council Policy 500-2.
Attachment A contains additional expenditure details as requested by the Committee at its August 30, 2017, meeting, and a glossary of terms in the order they appear on the financial reports.
Attachment A - FY 2016-17 Measure W Budget Update - Unaudited for the Year Ended June 30, 2017